NEW YORK (Reuters) - Next week's Federal Reserve meeting and possible signals on the pace of rate hikes for next year could pose the biggest risk yet to the rally the U.S. stock market has seen since last month's presidential election.

While investors have long anticipated the Fed will raise rates at the Dec. 13-14 meeting - in what would be its first such move in a year and second in nearly a decade - the worry for some stock investors is that the Fed takes a more aggressive stance on inflation and future hikes.

Stocks have set a string of record highs since the Nov. 8 election on hopes of a pickup in U.S. economic growth, thanks to President-elect Donald Trump's promises of increased infrastructure spending, lower taxes and easier regulations.

U.S. investors seem optimistic about prospects of future growth, but the question remains if the Fed does as well.

The U.S. central bank should announce new economic forecasts next week, along with a rate hike. If inflation is expected to pick up quickly, the Fed may need to raise rates faster than investors expect, and that could be a negative for U.S. stocks.

"If they believe that inflation is going to march higher and more rapidly ... That would give the market reason to pause," said Quincy Krosby, market strategist at Prudential Financial in Newark, New Jersey.

"I don't think investors want to hear that this is going to be an aggressive Fed."

Fed Chair Janet Yellen will more likely want to reassure investors that the transition to higher rates will be gradual, she said.

Last December, the Fed raised rates for the first time in nearly a decade, and later signaled four more hikes would come in 2016. But the outlook quickly changed as the economy did not pick up speed, oil prices fell further and the stock market plunged at the start of 2016.

Next week, "the market is going to try to key off of whether we are going to fall into the one-to-two (hikes), or the three-to-four for 2017," said Jason Ware, chief investment officer at Albion Financial Group in Salt Lake City.

"If in the statement and the discussion afterwards it appears that the Fed is getting more concerned that they are behind the curve and they have to tighten more aggressively than the market currently expects, that could knock stocks back."

Given the sharp run-up in equities since the election, some strategists are already advising caution. The S&P 500 has had its best five-week run since March and the Dow is up 7.8 percent since the election.

"The market is now overbought in the short and long terms," said Brad Lamensdorf, a manager for the Ranger Equity Bear exchange-traded fund, which bets stocks will fall.

Financials could see the biggest impact if there's a shift in the outlook for rates. The group has outperformed the broader market in the recent rally, partly on the view that Trump will ease regulations for the sector but also on expectations of rising rates, which benefit banks.

Stock investors also worry about the impact of rising rates on the U.S. dollar.

Strategists in a Reuters poll this week cited the dollar, which has strengthened sharply since the election, as among the biggest possible risks for stocks next year because of its negative impact on U.S. multinationals' earnings.

BATON ROUGE, La. (Reuters) - U.S. President-elect Donald Trump will likely ask a senior Goldman Sachs banker to coordinate economic policy across his administration, turning again to Wall Street for expertise in managing the world's largest economy, a transition official said on Friday.

Trump's pick of Goldman President Gary Cohn, 56, to head the White House National Economic Council comes despite Trump's past criticism of the financial sector's power.

Trump hammered Goldman and its Chief Executive Officer Lloyd Blankfein during the presidential campaign, releasing a television ad that called Blankfein part of a "global power structure" that had robbed America's working class.

The anti-Goldman message rankled some on Wall Street, although several alums of the bank had major roles in Trump's campaign and are bound for senior administration posts.

"That Trump is willing to take this step does suggest the political risk to the biggest banks may be diminishing," said Jaret Seiberg, an analyst at Cowen & Co.

The NEC coordinates economic policy across agencies, a key role for Trump's promise to jumpstart the economy after years of tepid growth.

Cohn, who is also Goldman's chief operating officer, hails from one of the most respected Wall Street establishments and would follow former Goldman executives Robert Rubin and Stephen Friedman in running the NEC.

"I think Trump feels confident that the establishment will help him fix some of our problems," said Jerry Braakman, chief investment officer of First American Trust.

Cohn was widely seen as Blankfein's heir apparent and his exit may give rise to a new group of leaders at the bank, most of whom have spent more than 20 years there.

NBC reported earlier that Trump had offered Cohn the job. A Goldman Sachs spokesman was not immediately available for comment.

Cohn is a former Goldman commodities trader from Ohio who joined the firm in 1990. He served in leadership roles in bond trading, eventually becoming co-president in 2006.

Cohn would join at least two other former Goldman bankers in the Trump administration, including Treasury Secretary-designate Steven Mnuchin and White House adviser Steve Bannon.

The abundance of Wall Street faces on his team exposes Trump to criticism he is veering away from pledges to protect American workers from powerful interests.

(Reporting by Steve Holland in Baton Rouge, Louisiana; Additional reporting by Jason Lange in Washington and Olivia Oran in New York; Editing by Tim Ahmann and James Dalgleish)

]]>By Siddharth Cavale and Sruthi Ramakrishnan

(Reuters) - Coca-Cola Co said on Friday that Muhtar Kent would step aside as chief executive next year and be replaced by James Quincey, a company veteran credited with several recent changes to help the company cut its dependence on sugary drinks.

Quincey's ascension was widely expected since he became chief operating officer in August 2015 after jobs that included running Coke's businesses in Europe and Mexico over two decades.

Kent, 64, will have completed nine years at the helm when he steps down in May, but he will continue as chairman of the board, a post he has held since 2009, Coke said.

Coke's shares were up 2.6 percent to $42.04 in afternoon trading, making the stock biggest percentage gainer on the Dow Jones industrial average.

Quincey, 51, is credited with several changes at Coke including introducing smaller bottles to boost profit and reducing the sugar and calorie content in drinks – initiatives he would continue to focus on, the CEO-designate said on Friday.

"The future in terms of the beverage industry in some parts of the world – yes, there'll be less added sugar, and yes, we think we need to push ahead with the smaller packages and reformulations and innovations," Quincey said.

He said Coke would also concentrate on its sparkling beverage business, push into other drink categories and continue to innovate.

Coke still gets about 70 percent of its volume sales from sodas and its sales have fallen in the last three years on sagging demand for sugary drinks, which health experts and governments have blamed for rising obesity levels.

Since Kent took over as CEO in July 2008, Coke's sales have increased by about 39 percent, while the company's shares have surged 61 percent.

VOTE OF CONFIDENCE

Quincey, who joined Coke in 1996, is also credited with streamlining Coke's bottling operations by merging its three main bottlers in Europe to form Coca-Cola European Partners Plc , now Coke's largest independent bottler by net revenue.

His latest promotion was given a vote of confidence by Warren Buffett, CEO of Berkshire Hathaway Inc , Coke's largest shareholder.

"I know James and like him, and believe the company has made a smart investment in its future with his selection," Buffett said in the statement issued by Coke.

The CEO announcement comes a day after Coke said Buffett's son Howard Buffett would retire from its board next year.

Some analysts saw the move as potentially paving the way for Buffett's firm Berkshire Hathaway to sell down its nearly $17 billion stake.

"Those counting on an eventual bid some day from 3G Capital and Budweiser for Coke, may think Berkshire Hathaway being out of the picture would make it less awkward for that group to buy Coke," Susquehanna analyst Pablo Zuanic said in a note.

Buffett teamed up with Brazilian private equity firm 3G Capital last year to buy Kraft and form Kraft Heinz Co .

That aside, Wall Street analysts hailed the succession plan.

"A move in the right direction as Quincey is a realist with a sense of urgency about diversifying the beverage portfolio and improving local execution via refranchising," CLSA analyst Caroline Levy said.

Quincey's background and significant experience in deal making as well as strong understanding and appreciation of the consumer and current trends would accelerate Coke's growth, Wells Fargo Senior analyst Bonnie Herzog wrote in a note.

His appointment is the second instance of a company elevating its COO to the CEO role in as many weeks.

FRANKFURT/LONDON (Reuters) - The European Central Bank hopes its decision to confront struggling Italian bank Monte dei Paschi at last will draw a line under a multi-year crisis that has risked tarnishing its reputation as a credible supervisor.

Reuters exclusively reported on Friday that the ECB rejected Monte dei Paschi's request for more time to complete an ambitious, 5 billion euro ($5.3 billion) cash call - effectively leaving it up to the Italian government to bail out the bank.

ECB officials told Reuters they hoped that a "precautionary recapitalisation" of Monte dei Paschi by the Italian state will pave the way for similar injections of government money into other Italian banks plagued by bad loans totalling 360 billion euros.

A precautionary recapitalisation is a type of state intervention in a struggling bank that is still solvent.

It means only a modest bail-in or write down in the value of a bank's bonds is likely, though the Italian government can buy shares or bonds in Monte dei Paschi only on market terms endorsed by EU state aid officials in Brussels.

"There is consensus that Monte dei Paschi needs a precautionary recap," one of the officials said, requesting anonymity. "Once that is done, it could serve as a template for other banks."

This scenario is subject to a number of open political questions, such as who will be in the new Italian government following Prime Minister Matteo Renzi's decision to resign and how much fiscal room the European Commission is prepared to give Rome for bank rescues.

A government-led recapitalisation will also raise questions about whether rules introduced since the 2007-09 financial crisis to prevent taxpayers having to fund bailouts in future banking crises have been worth it.

Monte dei Paschi's problems date back several years but until now the ECB, as the bank's main supervisor since November 2014, has avoided confronting matters head on.

This is despite the bank failing the EU's regular stress test of lenders twice in a row - the latest was in July this year - showing how Monte dei Paschi is suffering from bad loans and too little capital.

Further delays by the ECB would start to undermine its reputation as a banking supervisor or single supervisory mechanism (SSM) that is meant to cut through national vested interests in the euro zone.

"Monte dei Paschi is an existential question for the ECB, a matter to act for its own credibility," said Karel Lannoo, chief executive of Brussels think tank CEPS. "We are two years into the SSM, and the Monte dei Paschi question has been known for five to six years."

Nicolas Veron, a research fellow at economic think tank Bruegel in Brussels and the Peterson Institute in Washington, said the ECB has been slow to act until now because it was building up capacity as a supervisor.

"I would have preferred them to be more forceful earlier. They have taken a risk in terms of their reputation. This delay has not gone unnoticed, but in fairness, it has to be asked if they had the capacity to do things more quickly," Veron said.

Successive Italian governments failed to tackle the issue, which became a political taboo this year when new European rules came into force banning state bailouts unless private investors take losses first.

The fall of Renzi this week following a resounding defeat in a referendum on constitutional change is seen by some commentators as bringing the country's banking crisis to a head, thus forcing the ECB's hand.

President Sergio Mattarella began consulting political leaders on Thursday to seek a consensus to back a government. Without that, he will have to dissolve parliament and call early elections.

ECB officials hope an interim government, ideally including economy minister Pier Carlo Padoan, would take the unpopular decision to inject capital into Monte dei Paschi, negotiating a way to compensate savers with the European Commission.

The precautionary recapitalisation model could also be used for other struggling lenders in Italy. This could lure private investors back into the sector and allow the banks to sell down their bad loans more quickly, an objective for the ECB.

Monte dei Paschi was the only Italian bank to come short under an adverse scenario in the pan-European stress test of large lenders this year.

($1 = 0.9460 euros)

(editing by David Stamp)

]]>By Philip Scipio

NEW YORK (IFR) - Incoming U.S. president Donald Trump has tapped Goldman Sachs COO Gary Cohn to head key White House advisory body the National Economic Council, NBC News reported on Friday.

Cohn becomes at least the third Goldman Sachs veteran called on by Trump so far to help shape policy once his administration comes to power in January.

Cohn, who joined the firm in 1990, had been widely viewed as the likely successor to Goldman CEO Lloyd Blankfein, though Blankfein has suggested he could stay on five more years.

Blankfein has battled back to health after being diagnosed with lymphoma in 2015.

In any event, a departure by Cohn could set the stage for a massive shakeup of management at Goldman Sachs, whose shares have rocketed up 33% since Trump's election victory.

In particular, as both Blankfein and Cohn come from the fixed income side of the business, Cohn's departure could pave the way for someone from the investment banking side to take over Cohn's dual role as president and chief operating officer.

That could put Richard Gnodde, David Solomon or John Waldron - the current co-heads of investment banking - in line for the position.

Goldman Sachs declined to comment.

(Reporting by Philip Scipio; Editing by Marc Carnegie)

]]>"Cigarettes smuggling is a low-risk, high-reward criminal activity because high taxes on cigarettes induce great financial incentive for smugglers to earn huge profits," said the report released by Ficci's CASCADE (Committee Against Smuggling and Counterfeiting Activities Destroying the Economy).

The report titled 'Invisible Enemy -- A Threat to Our National Interests' highlights that in the last one year, the Directorate of Revenue Intelligence (DRI) seizures of smuggled cigarettes have increased by 78 per cent from Rs 90.75 crore in 2014-15 to Rs 162 crore in 2015-16, followed by fabric/silk yarn, where the increase is by 73 per cent from Rs 24.03 crore in 2014-15 to Rs 41.78 crore in 2015-16.

"The seizures of gold have witnessed an increase of 61 per cent (from Rs 692.35 crore in 2014-15 to Rs 1,119.11 crore in 2015-16). While the Department of Revenue Intelligence seizures of machinery parts and electronic items has seen a decline," the report said.

The report was released at an international conference on 'Cross Border Illicit Trade in Goods: Impact on Economy and Consumers' in collaboration with the Department of Consumer Affairs.

The conference was organised with an aim to ensure that national and international stakeholders can dialogue with policymakers to identify opportunities for joint action between governments and the private sector to combat illicit cross-border trade.

"Operations in illicit cross-border trade, is a global problem of enormous scale, impacting virtually every product sector and every country. The illicit market for fake or counterfeit or smuggled products is also one of the biggest challenges faced by Indian industry, which is impacting 'Brand India' globally," said Hem Pande, Secretary, Department of Consumer Affairs.

"Safeguarding legitimate business owners' rights is a key to sustain the country's growth strategy. Addressing these issues cannot be done in isolation; it is a joint responsibility of consumers, enforcement agencies, the industry and the government," he added.

Najib Shah, Chairman of Central Board of Excise and Customs (CBEC), said that illegal trade is a growing menace and the need of the hour is collaboration among stakeholders to tackle it.

"Growth of illicit trade through e-commerce is a new challenge, which also needs urgent attention. Unchecked, it will continue to multiply. We also need to lay equal emphasis on the rights of legitimate businesses, which are greatly impacted by illegal trade," he said.

]]>By Leigh Thomas

PARIS (Reuters) - Just how fast the Federal Reserve hikes rates next year will be the all-important question global investors will be hoping to get answered when the U.S. central bank meets next week.

But Fed policymakers are likely to leave them guessing until the Trump administration clarifies its tax cutting and infrastructure spending plans, economists say.

There is little doubt that the Fed will raise interest rates for the first time in a year on Wednesday, with markets pricing in a near 100 percent chance for a quarter percentage point increase in its target range.

"With a rate hike being fully priced in, the focus will be on the statement and the updated Summary of Economic Projections," Unicredit economists wrote in a research note.

"While financial markets have gotten excited about the prospects of fiscal stimulus by the incoming administration, we expect that FOMC members won't incorporate such a scenario into their forecasts until it has been approved," they added.

The Fed increasingly stands out among major central banks with its tighter monetary policy after the European Central Bank extended its asset purchases on Thursday until at least the end of 2017, albeit at a slower pace.

Meanwhile, the Bank of England is widely expected to keep its key rate steady at 0.25 percent at a policy-setting meeting on Thursday and well beyond as it juggles risks from inflation, growth and Britain's decision to quit the European Union.

On the data front, flash purchasing manager indexes from major economies on Thursday and various U.S. business confidence surveys will offer clues as to how well confidence is holding up heading towards the end of the year.

Along with U.S. retail sales data on Wednesday, investors will in particular be looking for any signs that the prospect of anticipated tax cuts and stimulus is already boosting morale.

"Anecdotes and surveys suggest that business and consumer confidence has improved following the election," Bank of America Merrill Lynch economists Michelle Meyer and Alexander Lin wrote in a research note.

"The gain in animal spirits could amplify the boost to the economy from fiscal stimulus, creating upside risk to our forecast" for 2.0 percent U.S. growth in 2017 and 2.5 percent in 2018, they added.

In that light, investors will also be focusing on a Dec. 15 news conference U.S. President-elect Donald Trump scheduled last month for any hints about his economic policy plans.

]]>FRANKFURT (Reuters) - The European Central Bank contemplated even bolder stimulus measures than it agreed at Thursday's meeting but scaled back in a compromise move when conservatives, joined by several swing voters, pushed back, two sources with direct knowledge said.

Much of the ECB staff's preparation centred on a six month extension of its bond buying programme at a steady pace of 80 billion euros per month but ECB President Mario Draghi recognised that the proposal did not have a majority so he pushed for a compromise deal, the sources told Reuters.

The ECB then suggested a 12 month extension at 60 billion while more conservative nations were converging on six months at 60 billion. This led to the eventual compromise on nine months that still left Germany's Bundesbank in opposition but gave some other hawks enough to secure a majority, the sources said.

The ECB declined to comment

The compromise illustrates the tension within the Governing Council and the fatigue with quantitative easing as inflation remains far below the target and growth is still weak, even after 1.5 trillion euros of asset buys.

But with elections looming in four of the euro zone's five biggest economies, the bloc is facing increased uncertainty, essentially forcing the ECB to maintain extraordinary support.

Hawks argued that keeping the asset buys at 80 billion would give the impression that the asset purchases are open ended and it would also make its eventual end more difficult, either requiring a lengthy wind down or a steep reduction that could upset markets.

They also argued that the outlook for inflation and growth is relatively sanguine so the ECB would afford to preserve some of its firepower in case of a new inflation shock.

Although the Bundesbank has consistently voted against the asset buying scheme, the discussion still yielded some victories for the Germans, particularly in various changes to the parameters of the scheme, the sources said.

With the asset buys already extended twice, the ECB will run against many of its self imposed constraints by next year, requiring some changes. Although each modification carried some risk and opposition, the actual moves on Thursday were limited to relatively uncontroversial measures.

Germany was set against raising the issuer limit, which would let ECB buy more than 33 percent of each country's debt. And Germany also fought against abandoning the so-called capital key, or letting the ECB buy bonds out of proportion to each country's shareholding in the bank.

Increasing the issuer limit could make the ECB too dominant among bondholders and risk accusations it is financing governments. But maintaining the limit means the ECB would need to stop or reduce purchases in places like Ireland, Portugal, and eventually even in Germany as it runs against the boundary.

(Editing by Jeremy Gaunt)

]]>By Silvia Aloisi and Paola Arosio

MILAN (Reuters) - The European Central Bank has rejected a request by Italy's Monte dei Paschi di Siena for more time to raise capital, a source said on Friday, a decision that piles pressure on the Rome government to bail out the lender.

Italy's third-largest bank, and the world's oldest, had asked for a three-week extension until January 20 to try to wrap up a privately funded, 5-billion-euro ($5.3 billion) rescue plan in the face of fresh political uncertainty.

The ECB's supervisory board turned down the request at a meeting on Friday on the grounds that a delay would be of little use and that it was time for Rome to step in, the source said.

The Italian government is expected to intervene in the next few days to recapitalise the bank to avert the risk of it being wound down, according to banking sources said.

A Monte dei Paschi spokesman said the bank had not received any communication from the ECB. Its board is expected to meet later on Friday.

Shares in the Tuscan lender were suspended from trading due to excessive losses after falling 7.3 percent on the Reuters report that the ECB - the euro zone's banking supervisor - had rejected its request for more time.

A failure of Monte dei Paschi could threaten the savings of thousands of retail investors, ripple across the wider banking sector and provoke a financial crisis in the euro zone's third-biggest economy.

Italy faces the risk of early elections, and the prospect of an anti-euro party coming to power, after Prime Minister Matteo Renzi quit this week following the heavy defeat of his plan to reform the constitution in a weekend referendum.

One banking source said the consortium of investment banks that had been due to decide whether to underwrite the private capital-raising believed there was not enough time or willing investors to execute the deal by the year-end deadline imposed by the ECB.

NEW DELHI (Reuters) - India's debt-laden steel industry should not take the government's protectionist measures for granted and need to raise their efficiency to compete with foreign companies, the country's steel minister told Reuters in an interview on Friday.

The government has imposed various duties and quality controls on imports over the past two years to stop the inflow of cheap steel from countries such as China, the world's biggest producer burdened with a massive oversupply.

"In my view (protectionist measures) should not be there even for a month, but I have to see the overall position of the industry," minister Chaudhary Birender Singh said in his office.

"I've made it very clear to the industry that on one hand, we are giving this much of protection but on the other hand, I want a roadmap where you can improve upon your efficiency ... (to) narrow down the cost of production and sale price."

Goutam Chakraborty, analyst at Emkay Global Financial Services in Mumbai, said Indian companies typically produce commodity-grade steel with lower returns and are less efficient than foreign companies producing high-end steel.

BAD DEBTS

India's steel sector still accounts for 28 percent of banks' stressed loans, Singh said, but the government measures have helped local companies including JSW Steel, Jindal Steel and Power, Tata Steel and state-run SAIL to raise prices and improve margins.

Lenders now want the government to help the steel sector with more steps to expedite the recovery of their loans, including by asking state companies such as SAIL to buy some sick private steel assets or manage their operations.

Singh said loss-making SAIL or fellow state steel maker RINL were not in a position to buy any assets of private companies struggling to repay loans, but they could help with "expertise" or people.

"It's very strange. When banks advanced loans to these companies, they never consulted me. (But the) responsibility (of sorting the bad loans) now rests with the steel ministry."

The government expects India's steel-making capacity to rise over a third to around 160 million tonnes by mid-2018, for which SAIL will need to speed up its capacity increase that Singh said had not been satisfactory.

The company recently signed a technical agreement with South Korean steel maker POSCO, which Singh hopes will help raise output.

The minister also said Japan and South Korea were keen to invest in India's steel sector and their officials have already met with him.

]]>MUMBAI (Reuters) - State Bank of India has agreed to sell a 3.9 percent stake in its life insurance arm to affiliates of KKR and Temasek for 17.94 billion rupees ($266 million), the nation's biggest lender said on Friday.

The affiliates of KKR and Temasek will pick up 1.95 percent each in SBI Life, valuing the insurer at 460 billion rupees, the lender said in a statement, adding the deal was subject to regulatory approvals.

SBI Life will consider an initial public offering of shares during the next financial year beginning April 2017 depending on market conditions, Chief Executive Arijit Basu told Reuters.

State Bank of India currently owns 74 percent of the life insurance business, while BNP Paribas Cardif owns the remainder.

After the sale to KKR and Temasek, SBI's stake in the insurer will fall to 70.1 percent.

BNP Paribas Cardif continues to evaluate an offer from State Bank of India to pick up a further 10 percent stake in SBI Life, Basu said.

Kotak Mahindra Capital and SBI Capital Markets were the advisers on the deal with KKR and Temasek.

($1 = 67.4429 Indian rupees)

(Reporting by Devidutta Tripathy; Editing by Amrutha Gayathri)

]]>By Suvashree Choudhury and Rafael Nam

MUMBAI (Reuters) - When it comes to interest rate decisions under Reserve Bank of India's new governor, Urjit Patel, the only certainty seems to be that nothing is certain.

Both of Patel's policy reviews so far have wrong-footed investors, raising frustration that they are unable to get a handle on where monetary policy is headed in Asia's third-largest economy.

Economists and market players point to a significant shift in emphasis between inflation and growth at the two meetings as the main source of confusion, compounded by Patel's reluctance to discuss policy in public or private.

The RBI unexpectedly cut rates in October, saying it was comfortable about consumer inflation, then running at 5 percent, and the need to support economic growth.

That raised expectations for a rate cut this month, given inflation had eased further to 4.2 percent and the fact that worries about the economy had increased after Prime Minister Narendra Modi's shock move to ditch high-denomination banknotes.

Instead, the RBI held rates on Wednesday, stunning bond investors. The benchmark 10-year bond yield hit a 7-1/2 year low last month, but went up as much as 25 basis points after the RBI announcement.

The perceived inconsistency comes at a sensitive time for markets, as they seek to gauge the economic impact of Modi's demonetisation and are braced for Federal Reserve rate hikes.

"If you look at the October statement, you'll see that he (Patel) had said that the focus will be on growth and not towards CPI," said Murthy Nagarajan, head of fixed income at Quantum Mutual Fund.

"After demonetisation, when people are saying that there are concerns around growth, he has shifted and said that our focus is on CPI inflation and growth is not much of a concern. We really don't know what it is that he has got in his mind."

The RBI had no immediate comment.

INTEREST RATE PANEL UNANIMOUS

Central banks surprise markets the world over, and their job is not necessarily to make predictions easy.

But they generally offer some form of guidance to shape expectations ahead of policy decisions, because catching markets off guard repeatedly can undermine the transmission of policy.

The Fed, for example, releases projections of where policymakers see interest rates in the future, while other central banks may signal their policy bias in statements after policy meetings and through public appearances.

Patel had been widely seen in the inflation-fighting mould of his predecessor Raghuram Rajan. Both worked on setting an inflation target for India, a push rewarded by strong flows from foreign investors.

But their styles contrast. Rajan met economists and spoke publicly more frequently, and although central bankers are traditionally reluctant to be too open, those communications provide markets a measure of policy guidance.

Patel has rarely met economists and given only one speech and two media interviews since his appointment in September. He has kept news briefings after the policy review short, often deferring to his deputy governors.

"You have seen governors in the past trying to avoid surprise and be consistent with their communication to avoid big shocks to the markets," said a treasurer at a private domestic bank.

"Now we are seeing different interpretation (of) the same macroeconomic data in two policies."

Adding to the difficulty, the six-member monetary policy committee (MPC) that now sets interest rates in India has voted unanimously in each of the two decisions, making it hard for investors to distinguish doves from hawks.

"We just laughed when we saw the 6-0 vote on the rate decision. It clearly shows there is no great debate happening in the MPC," said a senior treasury official at a foreign bank.

PLACE YOUR BETS

An official familiar with the RBI's thinking rejected accusations it was inconsistent, pointing to a recent surge in oil prices and sticky core prices as reasons to remain concerned about inflation.

The RBI is also shifting from an inflation target of 5 percent by March 2017 to 4-5 percent by 2018, he added.

"At some stage you have to assert yourself to protect inflation and this gave an opportunistic window, as the impact of demonetisation on growth looks temporary," said the official.

Analysts still believe a 25 bps rate cut is on the table for the RBI's next policy review in February, given expectations that inflation will ease further.

But some investors are unwilling to commit to such a bet and are looking to hedge more as they brace for increased volatility.

"It's not possible to make a sensible forecast on what will happen in February," said Varun Khandelwal, managing director at Bullero Capital.

"We need to take stock at the end of January to see how India is affected by the Fed's stance, the union (federal) budget and the impact of demonetisation."

(Additional reporting by Abhirup Roy; Editing by Mike Collett-White)

]]>By Patricia Zengerle

WASHINGTON (Reuters) - The U.S. Senate overwhelmingly passed a compromise version of an annual defense policy bill on Thursday without controversial provisions such as requiring women to register for the draft or allowing contractors to make religion-based hiring decisions.

Ninety-two senators backed the $618.7 billion National Defense Authorization Act, or NDAA, and seven opposed it. Because it passed the House of Representatives by a similarly large margin last week, the bill now goes to the White House for President Barack Obama to veto or sign into law.

A White House spokesman told a briefing he did not yet have a position on the bill to report.

The 2016 bill, the last of Obama's presidency, includes some Republican-backed initiatives with which he has disagreed in the past. It includes a $3.2 billion increase in military spending, when there has been no similar increase in non-defense funding.

The bill also bars closures of military bases, although top Pentagon officials say they have too much capacity, and it blocks planned reductions in active-duty troop numbers.

And it continues policies that bar transfers of prisoners to U.S. soil from the detention center at Guantanamo Bay, Cuba, which Obama had hoped to close. While his administration has shipped most inmates from the controversial prison, the Democrat is not expected to accomplish his goal of shuttering it before he leaves office Jan. 20.

The NDAA passed both chambers in the Republican-led Congress with margins large enough to overcome a veto, and the compromise legislation features many provisions such as a military pay raise and an expansion of a landmark human rights bill, that are extremely popular in Congress.

After months of negotiation, the Senate and House Armed Services committees unveiled a compromise version of the NDAA last month that left out the Russell Amendment, a "religious freedom" measure Democrats said would have let federal contractors discriminate against workers on the basis of gender or sexual orientation, overturning Obama's executive order.

Some House Republicans said they hoped to revisit that provision after Trump takes office, when they do not have to worry about a veto threat from a Democratic White House.

The bill also excluded a provision that would have required women to register for the military draft, now that Pentagon leaders are moving to allow them into combat.

A provision recommending that the U.S. conducts yearly high-level military exchanges with Taiwan, which Beijing sees as a breakaway province, made it into the final bill.

China's defense ministry said in a statement on its official microblog on Friday that it was "firmly opposed" to the move, which would "inevitably damage U.S. interests".

]]>MILAN (Reuters) - A consortium of investment banks that must decide whether to underwrite a privately-backed 5-billion euro rescue plan for Monte dei Paschi di Siena believes there is not enough time and no willing investors to execute the deal by a year-end deadline, a source said on Friday.

Another source told Reuters earlier that the European Central Bank had rejected a request by the ailing lender for more time to raise capital, in a move that piles pressure on the Italian government to bail out the bank.

MACAU (Reuters) - Macau, the world's biggest gambling hub, moved on Friday to clarify it had not tightened daily cash withdrawal limits for Chinese gamblers, after fears of a crackdown on illicit money outflows sent shares in casino operators tumbling.

The South China Morning Post, citing a finance industry source, reported late on Thursday that the Monetary Authority of Macau would halve the amount of cash that China UnionPay cardholders can withdraw from automated teller machines (ATMs) in the territory.

The paper said this would mean halving the daily cap for clients of China's largest provider of bank cards to 5,000 patacas ($626).

The Macau authority, however, said it limited withdrawals to 5,000 patacas per transaction, effective Friday, but had not changed its daily limit.

UnionPay's international arm also said it had not changed its policy on overseas cash withdrawals using cards issued on the mainland, adding the daily limit was still 10,000 yuan ($1,450), with an annual cap of 100,000 yuan.

ATM withdrawals are not a major source of cash for most Chinese gamblers, especially its high rollers. Many average players use UnionPay to buy goods, then return them to get a cash refund which they use to gamble.

But the reported change was seen as a signal of concern, alarming investors in a sector still recovering from a long-running anti-graft campaign under President Xi Jinping.

Monthly revenues from Macau have only returned to growth since August, helped by new resorts bringing in casual gamblers.

Shares of gaming groups including Melco Crown Entertainment, Las Vegas Sands Corp and Wynn Resorts fell by more than a tenth as the crackdown concerns swirled.

MORE SCRUTINY

China is stepping up measures to stem capital outflows, and analysts brushing off Friday's limited action from Macau warned that the broader worry remained.

"The risks of more capital outflow control measures should not be ignored," said Chelsey Tam, analyst at Morningstar, noting this could limit a recovery in gaming revenues next year.

The Chinese State Administration of Foreign Exchange (SAFE) has been vetting transfers abroad worth $5 million or more, and has increased scrutiny of big outbound deals, even those with prior approval.

The yuan skidded to more than eight-year lows late last month, and China's November foreign exchange reserves fell more than expected to $3.05 trillion, the lowest in nearly six years.

In Macau's glitzy Grand Lisboa casino, it was largely business as usual on Friday as gamblers and business owners shrugged off the prospect of the cash withdrawal limits that had spooked investors.

One Macau pawnshop owner, who gave his name as Cheung, said any official crackdown was unlikely to solve the capital outflow problem, as China's illegal channels and shadow banks flourish.

"What's the point of just restricting Macau? Don't you think mainland Chinese will just take their money to the Philippines or Singapore?," he told Reuters.

($1 = 7.9810 patacas)

(Reporting by Venus Wu in Macau, with additional reporting by Clare Jim in HONG KONG, Adam Jourdan in SHANGHAI, Clara Ferreira-Marques in SINGAPORE, Ankit Ajmera in BENGALURU and Byron Kaye in SYDNEY; Editing by Ian Geoghegan)

]]>New Delhi: As many as 85 per cent ATMs have been recalibrated by November 30 for the new currency notes, Parliament was informed on Friday.

"Till November 30, a total of 179,614 ATMs have been recalibrated. There are 211,594 ATMs of scheduled commercial banks and 14,324 white label ATMs in the country according to September 30 data," Minister of State for Finance Santosh Kumar Gangwar told the Lok Sabha in a written reply.

He said that the government has advised the banks to deploy micro-ATMs in the rural areas and as on December 2, a total of 1,14,036 micro-ATMs have been deployed.

He also said that scheduled commercial banks, excluding regional rural banks, do not need permission from the Reserve Bank of India (RBI) to set up ATMs at their branches and extension counters.

"Under some set of conditions the banks can set up ATMs at off-site locations as well," he said.

]]>NEW DELHI, Dec 9 (Reuters) - India's industrial output unexpectedly fell 1.9 percent in October from a yearearlier, driven down by a contraction in manufacturing andmining sectors, government data showed on Friday.

]]>MUMBAI, Dec 9 (Reuters) - State Bank of India hasagreed to sell a 3.9 percent stake in its life insurance arm toaffiliates of KKR and Temasek for 17.94 billionrupees ($266 million), the nation's biggest lender said onFriday.

The affiliates of KKR and Temasek will pick up 1.95 percenteach in SBI Life, valuing the insurer at 460 billion rupees, thelender said in a statement, adding the deal was subject toregulatory approvals.

SBI Life will consider an initial public offering of sharesduring the next financial year beginning April 2017 depending onmarket conditions, Chief Executive Arijit Basu told Reuters.

State Bank of India currently owns 74 percent of the lifeinsurance business, while BNP Paribas Cardif owns the remainder.

After the sale to KKR and Temasek, SBI's stake in theinsurer will fall to 70.1 percent.

BNP Paribas Cardif continues to evaluate an offer from StateBank of India to pick up a further 10 percent stake in SBI Life,Basu said.

Kotak Mahindra Capital and SBI Capital Markets were theadvisers on the deal with KKR and Temasek.

]]>REUTERS - Indian banks' loans rose 6.6 percent in the two weeks to Nov. 25 from a year earlier, while deposits rose 15.9 percent, the Reserve Bank of India's weekly statistical supplement showed on Friday.

NEW DELHI (Reuters) - Prime Minister Narendra Modi's surprise decision to scrap high-value banknotes has upset preparations for next year's budget because of the resulting disruption to growth, revenues and asset sales, two government sources said.

Modi scrapped 500-rupee and 1,000-rupee banknotes on Nov. 8 in a bid to flush out cash earned through illegal activities, or earned legally but never disclosed to the taxman.

Officials fear the move will slow economic activity for much longer than originally expected, as millions of people continue to queue at banks and ATMs for cash and companies struggle to pay wages and suppliers.

"We had thought the demonetisation will be a game changer," said one official, who has direct knowledge of budget preparations, adding the central bank should have taken more steps to ease the pain of ordinary people.

"We still have to start work on the budget."

Finance Minister Arun Jaitley is expected to present the annual budget for 2017/18 on Feb. 1.

The official said the cash crunch had hit sectors like construction, agriculture and auto makers, hurting tax receipts and complicating the government's asset divestment programme.

Two-wheeler and commercial vehicle sales declined by over 10 percent in November from a year ago, with weakness in the retail, gems and jewellery sectors also impacting factory gate duty receipts.

The government is likely to miss its annual target of raising 565 billion Indian rupees ($8.4 billion) through the sale of stakes in companies by a wide margin due to uncertainty in the markets, said the official.

The government has so far raised less than half of the target for the whole fiscal year.

N.R. Bhanumurthy, an economist at National Institute of Public Finance and Policy (NIPFP), a government-funded think tank, said revenue collections could fall by up to 350 billion rupees ($5.18 billion) this year.

"We are facing very uncertain times," said Bhanumurthy. "The government should weigh the impact of demonetisation on growth and revenue."

Another finance ministry official said economic growth for the current fiscal year to March 2017 could fall below the central bank's revised estimate of 7.1 percent, putting pressure on fiscal deficit targets.

The federal government has partially deferred a hike in wages of its 10 million employees and pensioners to cut its spending bill.

Jaitley, however, still hopes to hit his deficit goal of 3.5 percent of gross domestic product in the current fiscal year, said a source familiar with his thinking.

The Reserve Bank of India has dashed hopes of a windfall of nearly $15 billion based on expectations that up to 30 percent of the "black cash" would expire worthless, enabling it to pay a one-off dividend to the government.

In the event, over 80 percent of the old notes have already been deposited ahead of Dec. 30 deadline to deposit them at the bank.

Finance ministry officials estimate that only 5-10 percent of the cash will expire worthless, raising questions over whether the entire exercise - billed as an attack on illicit "black cash" - was justified.